Goldman Sachs 2015 Annual Report Download - page 46

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
Although we take protective measures and endeavor to
modify them as circumstances warrant, our computer
systems, software and networks may be vulnerable to
unauthorized access, misuse, computer viruses or other
malicious code and other events that could have a security
impact. If one or more of such events occur, this potentially
could jeopardize our or our clients’ or counterparties’
confidential and other information processed and stored in,
and transmitted through, our computer systems and
networks, or otherwise cause interruptions or malfunctions
in our, our clients’, our counterparties’ or third parties’
operations, which could impact their ability to transact
with us or otherwise result in significant losses or
reputational damage.
The increased use of mobile and cloud technologies can
heighten these and other operational risks. We expect to
expend significant additional resources on an ongoing basis
to modify our protective measures and to investigate and
remediate vulnerabilities or other exposures, but these
measures may be ineffective and we may be subject to
litigation and financial losses that are either not insured
against or not fully covered through any insurance
maintained by us. Certain aspects of the security of such
technologies are unpredictable or beyond our control, and
the failure by mobile technology and cloud service
providers to adequately safeguard their systems and prevent
cyber attacks could disrupt our operations and result in
misappropriation, corruption or loss of confidential and
other information. In addition, there is a risk that
encryption and other protective measures, despite their
sophistication, may be defeated, particularly to the extent
that new computing technologies vastly increase the speed
and computing power available.
We routinely transmit and receive personal, confidential
and proprietary information by email and other electronic
means. We have discussed and worked with clients,
vendors, service providers, counterparties and other third
parties to develop secure transmission capabilities and
protect against cyber attacks, but we do not have, and may
be unable to put in place, secure capabilities with all of our
clients, vendors, service providers, counterparties and other
third parties and we may not be able to ensure that these
third parties have appropriate controls in place to protect
the confidentiality of the information. An interception,
misuse or mishandling of personal, confidential or
proprietary information being sent to or received from a
client, vendor, service provider, counterparty or other third
party could result in legal liability, regulatory action and
reputational harm.
Group Inc. is a holding company and is dependent for
liquidity on payments from its subsidiaries, many of
which are subject to restrictions.
Group Inc. is a holding company and, therefore, depends
on dividends, distributions and other payments from its
subsidiaries to fund dividend payments and to fund all
payments on its obligations, including debt obligations.
Many of our subsidiaries, including our broker-dealer and
bank subsidiaries, are subject to laws that restrict dividend
payments or authorize regulatory bodies to block or reduce
the flow of funds from those subsidiaries to Group Inc.
In addition, our broker-dealer and bank subsidiaries are
subject to restrictions on their ability to lend or transact
with affiliates and to minimum regulatory capital and other
requirements, as well as restrictions on their ability to use
funds deposited with them in brokerage or bank accounts
to fund their businesses. Additional restrictions on related-
party transactions, increased capital and liquidity
requirements and additional limitations on the use of funds
on deposit in bank or brokerage accounts, as well as lower
earnings, can reduce the amount of funds available to meet
the obligations of Group Inc., including under the Federal
Reserve Board’s source of strength policy, and even require
Group Inc. to provide additional funding to such
subsidiaries. Restrictions or regulatory action of that kind
could impede access to funds that Group Inc. needs to make
payments on its obligations, including debt obligations, or
dividend payments. In addition, Group Inc.’s right to
participate in a distribution of assets upon a subsidiary’s
liquidation or reorganization is subject to the prior claims
of the subsidiary’s creditors.
34 Goldman Sachs 2015 Form 10-K